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ACAS Code does NOT apply to Ill Health Dismissals

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Holmes v Qinetiq Ltd


Employers are required to follow the ACAS Code of Practice on Disciplinary and Grievance Procedures where a disciplinary procedure has been invoked. If they do not follow the ACAS Code, then employees may be entitled to an increase in compensation of up to 25%.


Disciplinary situations are noted in the Code to cover both misconduct and poor performance. Misconduct clearly involves culpable behaviour.


Poor performance however is capable of involving both culpable and non-culpable conduct. Where poor performance is due to a genuine ill health absence, culpable conduct is not involved. An employer would not be expected to deal with such a situation as a disciplinary matter, which means that the Code does not apply.


In this case the Employment Appeal Tribunal (“EAT”) considered for the first time whether the power to increase or decrease an award of compensation for a failure to comply with the ACAS Code of Practice extends to dismissals on the grounds of ill health.


The EAT concluded that the ACAS Code does not extend to such dismissals, and is instead limited to disciplinary and poor performance situations.



The Employment Tribunal had awarded the claimant, a security guard, compensation for unfair dismissal and unlawful discrimination. He had been dismissed on the grounds of ill health on the basis that he was no longer capable of doing his job i.e. capability. At the tribunal the employer conceded that the dismissal was unfair because it had failed to obtain an up to date Occupational Health report about the claimant’s ability to attend work after an operation to resolve his pain.


The Tribunal dealt with the question of whether the power to increase compensation for failure to comply with the requirements of the relevant ACAS Code of Practice extends to dismissal on ground of ill health.


It concluded that the ACAS Code of Practice does not extend to ill health dismissals. The reasons given by the Tribunal relate to the issue of culpability – in that the ACAS Code of Practice “does not apply to internal procedures operated by an employer concerning an employee’s alleged incapability to do the job arising from ill health or sickness absence and nothing more”.


The ACAS Code’s application is therefore limited to internal procedures relating to disciplinary situations, including misconduct or poor performance and “the correction or punishment of culpable behaviour of some form or another”.


In this case, no disciplinary procedure was invoked because nothing in his conduct or performance gave rise to a disciplinary situation.


EAT Decision

Amongst other issues, the Employment Appeal Tribunal examined the issue of whether the Tribunal was correct to refuse an increase to the award.


Its view was that the Tribunal was correct to refuse such an increase, and concluded that the power under section 207A(2) of TULR(C)A to increase or decrease an award for compensation for failure to comply with the relevant ACAS Code of Practice does not extend to dismissals on the grounds of ill health.


Comment:  This decision has important implications for employers, because it clarifies the scope and limits of the ACAS Code.


In practice this means that in scenarios where employers dismiss employees for ill-health, they are not obliged to follow the ACAS Code of Practice. As a result the increase in compensation under 207A(2) of TULR(C)A is not available to employees in this type of situation.


However, please bear in mind that the position would be different were an employee’s ill health leads to a disciplinary issue and a procedure is followed to address the employee’s alleged misconduct e.g. a failure to follow a sickness reporting procedure.


This case is helpful in clarifying that culpability is key to whether the Code applies to capability situations. Unfortunately, the question of whether some situations involve culpable behaviour on the part of an employee will continue to be a difficult one to answer.


On a practical level the question of whether a situation can be categorised in a particular way is less important than ensuring that the necessary elements of a fair process are followed. If there is any doubt, the best course of action will be to follow the Code and its principles.


Note that in the recent case of Phoenix House Ltd v Stockman and another, the EAT faced another question regarding the scope of the Code. This time it had to decide whether the Code applies to dismissals for “some other substantial reason (SOSR)” – one of the 5 potentially fair reasons in law to dismiss someone. In this case the dismissal resulted from a breakdown in a working relationship.


The Employment Tribunal upheld Ms Stockman’s unfair dismissal claim on the basis that no reasonable employer would have taken the view that the relationship in question had broken down to the extent necessary for dismissal to be a reasonable option. It applied a 25% uplift to Ms Stockman’s compensation in response to various breaches of the Code.


The EAT agreed that the dismissal was both procedurally and substantively unfair BUT rejected the ET’s conclusion that the Code applied. This contrasts with another EAT decision where the Code was found to apply to a situation that began as a conduct related matter but ended up as a SOSR dismissal, based on a breakdown in an employment relationship (Lund v St Edmund’s School Canterbury). Therefore, it would be most helpful for employers (and HR advisers!) if the next case to address the issue will consider the degree of culpability.

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